# PS4 - ECN 713 Spring 2010 Natalia Kovrijnykh Problem Set 4...

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ECN 713 Spring 2010 Natalia Kovrijnykh Problem Set 4: Due on Thursday, March 4, in class (100 points total) capital. Households are identical, with preferences over lifetime consumption given by E 1 P t =0 t u ( c t ) : (For simplicity, assume that households do not value leisure.) The representative household is endowed with one unit of time in each period. It decides to allocate this time between working for the representative ±rm (fraction u t ) and accumulating its human capital (fraction 1 u t ). The law of motion for the individual human capital is given by h t +1 = [1 + b (1 u t )] h t ; where b > 0 is a parameter. t is u t h t . The household also accumulates physical capital, k t , in the usual fashion. The law of motion for the individual physical capital is given by k t +1 = i t + (1 ± ) k t ; where i t is investment in period t

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## This note was uploaded on 11/19/2010 for the course ECON 210b taught by Professor Natalia during the Spring '10 term at ASU.

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PS4 - ECN 713 Spring 2010 Natalia Kovrijnykh Problem Set 4...

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